Subsidized firms must cut back on the perks

Published 8:00 pm, Sunday, October 12, 2008

By BARBARA SHELLY

Should I ever be fortunate enough to be bailed out from the rigors of my workaday life, look for me at St. Regis Monarch Beach.

The resort, on a Pacific Ocean bluff midway between Los Angeles and San Diego, made news last week as the site of a weeklong meeting that a subsidiary of the American International Group Inc. hosted for about 100 of its top insurance agents at a cost of $440,000.

The timing was inconvenient, and not only because attendees just missed out on the October "Vino al Vino" special in the resort's Spa Gaucin, where a $300 package includes, among other things, a 60-minute "Chardonnay sugar scrub."

There was also the matter of the $85 billion taxpayer-subsidized bailout received by AIG days before the meeting.

The getaway was described in a congressional hearing on Tuesday as an "executive retreat." The idea of the just-reprieved brass golfing and enjoying pedicures brought denunciations from the White House, which called the behavior "despicable," and from Barack Obama, who called the event a "$400,000 junket."

By Wednesday, company CEO Edward M. Liddy had issued a hasty clarification, in the form of a letter to U.S. Treasury Secretary Henry Paulson.

"The vast majority of the attendees were independent business people and their guests, not AIG employees," he said. "Indeed, of the more than 100 attendees, only 10 were employees of one of our insurance subsidiaries who attended to represent their company. Not a single corporate executive from AIG headquarters attended."

Corporate execs have pulled some atrocious stunts. There was one a few years ago who, among other things, spent $6,000 of company money on a shower curtain. The Enron Corp. spent $20 million on contemporary art months before its collapse. The disgraced CEO of Westar Energy in Topeka, Kan., installed a gourmet kitchen at company expense.

But AIG executives did not jet off to St. Regis Monarch Beach in the wake of the federal bailout, and so did not ensure permanent membership in the CEO hall of shame.

Good.

But about the same time Liddy was clearing up the matter of exactly who enjoyed a week at the resort, the New York Federal Reserve lent an additional $37.8 billion to AIG so that the insurer could have access to cash.

With the hot seat getting more searing by the minute, AIG announced it was canceling another scheduled gathering for insurance brokers, this one at the Ritz-Carlton in California's Half Moon Bay.

Most of us are aware -- even if dimly -- that the corporate world offers perks are not enjoyed by employees of your local convenience store. Firms routinely schedule incentive trips to reward top salespersons.

But appearances matter, and what appeared this week was the invoice from the St. Regis, which showed that the post-bailout party cost AIG $23,000 at the Spa Gaucin, $1,500 at the Salon Vogue, $140,000 on rooms and $7,000 on the golf course.

AIG is working with taxpayer dollars now, and other corporate free-wheelers will join them shortly.